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April 5, 2018
    Article highlights
  • Purpose of a corporate compliance program.
  • How to establish or refine a corporate compliance program.

No matter what industry your organization is in, corporate compliance is an essential part of operations.

What is corporate compliance? Simply put, corporate compliance is the process of making sure your company and employees follow the laws, regulations, standards, and ethical practices that apply to your organization.

Effective corporate compliance will cover both internal policies and rules and federal and state laws.

Enforcing compliance in corporate policy will help your company prevent and detect violations of rules. This can save your organization from fines and lawsuits.

Corporate compliance also lays out expectations for employee behavior, helps your staff stay focused on your organization’s broader goals, and helps operations run smoothly.

This process should be ongoing. Most organizations establish a corporate compliance program to help govern policies and compliance.

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The Purpose of a Corporate Compliance Program

A corporate compliance program is a formal system to help your organization maintain compliance in all areas of operation.

The program will focus on upholding policies and procedures that prevent the organization and employees from breaking laws and regulations.

An effective corporate compliance program integrates all compliance efforts – from compliance with external regulations to compliance with internal rules and procedures.

Ultimately, the purpose of a corporate compliance program is to protect your organization. When employees are trained in compliance, they are more likely to recognize and report illegal or unethical activity.

This can help your organization avoid waste, fraud, abuse, discrimination, and other practices that disrupt operations and put your company at risk.

Maintaining compliance enables your employees to do their jobs well, keep customers happy, and reach their career goals. In turn, this helps your company grow and achieve organizational goals.

By making sure all areas of your organization are working together and maintaining standards, corporate compliance can help prevent major disasters and failures.

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In the event that your organization does face a lawsuit, your corporate compliance program will help you in court.

As one report from Rutgers School of Law put it, “an organization that has made a robust effort to prevent and detect violations of the law by its employees and others acting for it will be treated less harshly than one that was indifferent to complying with the law.”

How to Create a Successful Corporate Compliance Program

Your organization can’t afford to ignore the need for a corporate compliance program or create one as an afterthought.

The program should be well planned and implemented, with coinciding training programs to guarantee personnel are well versed in all areas of compliance.

Here are a few steps to establish or refine your corporate compliance program:

Get your leadership on board

Your corporate compliance program won’t run itself. There must be one person who’s responsible for managing the program day-to-day.

Depending on the size of your organization, you may have one compliance officer or several. But in any case, those in charge of the compliance program must have the authority to enforce the rules and hold staff at all levels accountable.

Those running the program must have direct access to the company’s governing body – which may include senior management or the board of directors.

That governing body should regularly assess the effectiveness of the corporate compliance program. They should also take action when they learn of a potential compliance issue.

People working in an open office.

Corporate compliance is about fostering a workplace culture that values integrity and ethical conduct.

This starts at the top.

In order for your corporate compliance program to work, your organizational leaders need to abide by the rules.

Your company leaders should encourage ethical behavior and openly talk about the importance of compliance.

Leaders should also welcome employee input, stressing that employees won’t be punished for reporting unlawful or unethical behavior.

In its checklist for evaluating corporate compliance programs, the Department of Justice suggests asking the following questions:

  • How have senior leaders, through their words and actions, encouraged or discouraged the type of misconduct in question?
  • What concrete actions have they taken to demonstrate leadership in the company’s compliance and remediation efforts?
  • How does the company monitor its senior leadership’s behavior? How has senior leadership modeled proper behavior to subordinates?

Conduct risk assessments

Corporate compliance is about managing risk.

Therefore, to establish an effective program, you need to know what compliance areas pose the highest risks to your organization.

Once you recognize these areas, you can focus your resources to address them. Remember to regularly conduct assessments, since risks are always changing.

The Association of Corporate Counsel (ACC) suggests conducting a formal assessment process to evaluate factors including:

  • Audit results
  • Recent litigation
  • Compliance complaints
  • Employee claims
  • Industry enforcement trends
  • Policies in each particular risk area

The ACC suggests conducting a risk assessment once a year.

Once your leadership team has identified the highest risk factors, you can take the necessary actions to mitigate those risks and ensure compliance.

This can help your organization proactively prevent compliance violations.

Establish and maintain your code of conduct, policies, and standards

A well-defined code of conduct is a must-have for your corporate compliance program.

The code of conduct helps define the purpose of the program and sets expectations for behavior.

Your corporate compliance code of conduct should lay out who’s responsible for managing the program and how employees should report misconduct. It should clearly state that employees who violate the code of conduct will be disciplined.

Corporate policies should build on the code of conduct to provide guidelines for specific areas of compliance. This may include issues like corporate corruption, bribery, tax practices, conflicts of interest, record retention, and more.

The exact areas to address will depend on your industry.

From there, you must establish procedures to help employees correctly carry out policies.

Creating step-by-step guidelines for a process can help ensure compliance and make noncompliance easier to identify.

Some areas in certain industries may require additional standards. For example, the Foreign Corrupt Practices Act may require you to keep detailed protocols for screening third-party business partners.

Properly train all employees

Of course, policies and standards do no good if employees don’t abide by them.

After you’ve established the policies for your corporate compliance program, you must disseminate them to every member of your staff.

Make sure company officers, employees, and third-party vendors read and sign off on policies and procedures.

Along with sending out policies, your organization must conduct regular compliance training.

Team working in an office.

All employees and relevant vendors should be trained on things such as laws, regulations, corporate policies, and prohibited conduct. Depending on the size of your organization, you may also conduct training tailored to specific employees in high-risk areas.

The ACC recommends that organizations track, document, and follow up on training.

Your organization should also take steps to measure the effectiveness of training. This will help improve your corporate compliance program and training over time.

Continually improve your program

Corporate compliance is an ongoing process.

As your organization establishes a corporate compliance program, make sure you create systems to help you assess the program.

Your corporate compliance officer(s) should monitor the program and address any gaps in compliance control. They should also conduct audits of specific areas to assess compliance, uncover risks or violations, and see how effective the program is.

Your organization’s governing body should use this information to improve the program – revising policies, strengthening training, and establishing better reporting processes.

A good corporate compliance program can help prevent improper conduct in your organization. This keeps things running smoothly, minimizes risks, and helps your company maintain a good reputation.

If improper conduct does occur, corporate compliance helps you properly address it, protect your organization, and prevent similar instances.

Don’t wait until an incident has occurred to create or strengthen your organization’s corporate compliance program.

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